Dear Taxman,
This is both a US and Canada specific question
concerning the tax implications of significant leaky
condo repair costs.
I am a US resident who owns a Vancouver condo purchased
as a rental property in 1990. It has been rented 100%
of the time since, and has never been used personally.
During 2004 I was assessed and have already paid over
CD$130,000 to the condo Strata Corporation for leaky
condo repairs (estimated to begin repair project later
in 2005). An additional (and hopefully final)
assessment of CD$31,000 will be paid by me in May,
2005. The most recent tenant has understandably vacated
due to the forthcoming repairs. The United States IRS
is probably not familiar with the "leaky condo
syndrome" and thus may question any deductions that are
classified as repair expenses to the rental property.
Has this been your experience as a cross-border tax
consultant? How have people been treating these
significant expenses? Can they be deducted as a rental
repair expense without raising the dreaded "audit flag"
from the IRS? How do you recommend these expenses be
treated to try to recoup as much of this expense as
possible? Your kind response will be sincerely
appreciated.
XXXXX in Maryland, USA.
===============================================
david ingram replies:
For Tax purposes, the repairs are a deputation against
income.
However, as a non-resident of Canada, you will
capitalize most of them against future Capital Gains
for Canadian Tax purposes because Canada DOES NOT ALLOW
a rental loss to be carried forward for non-residents.
Therefore, on your Canadian Section 216(4) income tax
return, you would only claim enough repairs to net your
rent to zero. You would capitalize the rest.
In the US, you are limited to your $25,000 rental loss
and the same thing would happen. Claim enough loss to
get to -$25,000 and capitalize the balance. or limit
the loss and try and use the balance in future years.
I would need more information on your US income to
advise further and would likely charge you to do that.
Answers to this and other similar questions can be
obtained free on Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred
Snyder of Dundee Wealth Management and I, David Ingram
will be hosting an INFOMERCIAL but LIVE talk show
called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to
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www.600AM.com
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